GE first showed off its smart grid-aware oven ranges, hot water heaters, and dryers this past May. The appliance manufacturer is about to face some major competition from Whirlpool, which just announced plans to put 1 million Smart Energy clothes dryers on shelves by the end of 2011. That’s a quarter of Whirlpool’s total expected production.

Like other smart appliances, the Whirlpool dryer will talk to utilities through digital networks (wirelessly or through home wiring) to determine the best times for use based on overall grid electricity consumption. When the dryer’s built-in sensor detects peak electricity demand, the heating element will periodically turn on and off during the drying cycle while spinning continues, saving up to 95% in energy. Customers will also be able to program the dryer to operate only when electricity prices are lowest.

Whirlpool won’t say how much the dryers cost, but the company expects the smart appliances to save customers $20 to $40 a year. GE’s upcoming smart hybrid water heater, however, will sell for $1,500 more than standard water heaters, so it’s safe to assume that the Whirlpool dryer will also be expensive. But once the majority of utilities implement variable electricity pricing that changes based on demand, the savings from smart appliances could add up.

Soon enough, smart grid appliances will become de rigueur–Whirlpool plans to have all new appliances smart grid-enabled by 2015, and GE has smart versions of all its appliances in the testing stages.